A sizable 2.6 bushel per acre corn yield reduction took place in the November supply and demand report which was enough to decrease production to 14.5 billion bu (bbu). This is still the 3rd largest corn crop in US history. The USDA increased corn exports by 325 million bu (mbu) but made a 75 mbu reduction to feed and residual use. If correct, this puts US exports at a record 2.65 bbu this year. This is forecast to leave the US with a tight 1.7 bbu corn carryout and an average cash values of $4.00. 

The US soybean yield was also reduced 1.2 bushels per acre for a 50.7 bushel average for the US. This is now forecast to give the US a 4.17 bbu soybean crop. This is still the fourth largest soybean crop in US history. The only change to soybean demand was a 3 mbu increase to seed and residual, but the decline in production was enough to give the US a projected carryout of 190 mbu, a 100 mbu decrease from last month, and what is approaching a minimal pipeline supply. The USDA is now forecasting an average soybean cash value of $10.40 per bushel. 

The question with the soybean balance sheets is why exports did not increase. The answer is that the USDA is projecting soybean values will rally to a point where exports are rationed. Given this scenario, the USDA may not alter exports even if we do see weekly sales remain strong. 

Only minimal changes were made to the domestic wheat balance sheets. Production was left unchanged at 1.826 bbu and the only change to demand was a 6 mbu increase to food and seed uses. This will leave the US with an adequate 877 mbu in ending stocks. The average cash wheat value was left unchanged at $4.70 per bushel. 

On the global side there were significant changes to balance sheets as well. Corn ending stocks were reduced from 300.5 million metric tons (mmt) to a current 291.4 mmt. Soybean ending stocks were also lowered from 88.7 mmt last month to 86.5 mmt this month. A minimal 1 mmt decrease was made to wheat ending stocks putting it at 320.5 mmt. 

Now that these numbers have been released, trade will start to focus on two main points of interest; South America production and next year’s crops in the United States. According to the recent baseline estimates the United States will produce a 14.9 bbu corn crop next year have 2021/22 ending stocks of 2.26bbu. Soybean production is forecast at 4.7 bbu and ending stocks at just 255 mbu. While these numbers will change several times, this indicates market strength will likely continue, primarily on soybeans. 

Farmers in Brazil are not as worried about production due to delayed plantings this year and continue to make sizable forward sales. In the country’s leading production state of Mato Grasso, farmers are already 61% sold on their soybeans compared to the average 34% at this time. Farmers in the state have also marketed 54% of their expected corn crop compared to the normal 32%. Record returns are the primary reason for the elevated selling interest. Farmers are also marketing their 2022 crops which is unusual this far in advance. 

Others in Brazil are not as eager to market new crop bushels and may not deliver sales already on the books.  Farmers in Brazil have seen futures rally since making early sales and are now wanting to renegotiate their early bookings. Brazil has already sold a large portion of their new crop soybeans for export and this development cause some buyers to become nervous over delayed shipments. 

When it comes to global corn balance sheets all eyes are centered on China. China has started to import more corn and is only forecast to elevate its needs in the future. China liquidated much of its usable corn reserves and now needs to refill this void. There are questions on how much corn China will need, with estimates ranging from 7 million metric tons to 30 million tons. Even if imports fall in the middle of this range it will be enough to alter global balance sheets, especially if weather continues to impact South American production. 

Even with a spread of over $2 per bushel, global feeders are opting to feed wheat at this time instead of corn. The primary reason for this is that wheat is more readily available in the global market from a greater variety of sources. This allows buyers to find wheat in more places than corn, which is mostly available from only the United States at this time. While corn is cheaper per bushel, freight advantages are narrowing the price gap. As a result, several of the US’s normal corn destinations are upping wheat feeding, including China. 

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